The Importance of Default Options for Retirement Saving Outcomes

James J. Choi, David Laibson and Brigitte C. Madrian

Edited by John Beshears

in Social Security Policy in a Changing Environment

Published by University of Chicago Press

Published in print June 2009 | ISBN: 9780226076485
Published online February 2013 | e-ISBN: 9780226076508 | DOI:
The Importance of Default Options for Retirement Saving Outcomes

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This chapter demonstrates the tremendous influence that defaults exert on realized savings outcomes at every stage of the savings life cycle, such as savings plan participation, contributions, asset allocation, rollovers, and decumulation. In a defined contribution savings environment, savings plans—whether they are employer-sponsored, government-sponsored, or privately sponsored—are only a useful tool to the extent that employees actually participate. Defaults can so easily sway such a significant economic outcome has important implications for understanding the psychology of economic decision making. But it also has important implications for the role of public policy toward saving. Defaults are not neutral—they can either facilitate or hinder better savings outcomes. Current public policies toward saving include examples of both.

Keywords: savings; asset allocation; defaults; public policy; saving plans

Chapter.  13471 words.  Illustrated.

Subjects: Public Economics

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